Introduction: Business cases are critical for projects
As regular readers of this blog will know, I’m a firm believer that organisations should progress business and IT change projects for the right reasons. The harsh reality is that all organisations – whether mid-size or multinational—have limited budgets for change. Naturally their executives and sponsors look to maximise the value for money they gain from their projects. Whether the project is to implement a new process, a new IT system, or launch a new product, it’s vital to know the likely financial consequences before making a decision. In order to assess this, decision makers need a firm view of the feasibility, costs and likely benefits that a change project will bring. This is often expressed in some form of business case or as part of a feasibility study. This becomes central to the change project, and should be revisited whenever there’s a material change in scope or when new information presents itself.
A clear business case enables senior decision makers to see the “size of the prize”. Putting it simply, they can see the size of the bet they are placing. How much money do they need to invest in the project? What return are they likely to get and over what period? And what other impacts might the project have. This is all essential decision making information which helps executives and project sponsors to decide which projects to pursue.
The business case lives beyond the project… but watch out for the trap!
The business case lives on beyond the project lifecycle. Ultimately, at some point in the future once the project has been delivered, the business case should be used for a benefits realisation exercise. This typically involves checking whether the organisation actually achieved the benefits that were projected. Perhaps the project is hoping to increase operational efficiency by smarter use of IT, enabling the organisation to deal with 10% more customers (and make 10% more sales) per annum. Or perhaps it’s going to reduce customer waiting time by 50%. Assessing the benefits actually achieve helps organisations to learn lessons from previous projects, but also may uncover opportunities for further improvement.
However, there’s a common trap here! The reality is that measuring the business benefit is impossible if the organisation doesn’t have a true and credible benchmark of how things were before the change. If you run a project to reduce customer waiting time, but you can’t currently measure this, how will you know if the goal has been achieved? Finding this absence of data after the project has been delivered is extremely frustrating; it means the organisation has spent money and it will never know whether that spend was worthwhile.
Three tips that can help
Here are three key considerations to keep in mind when aiming for “benefits friendly” business cases:
1. Ensure you can benchmark the status quo: As mentioned above, if you can’t measure the current performance, then it is impossible to determine objectively whether performance has improved. If you suspect there will be benefits, but cannot measure the current performance, these can still be mentioned in the business case but without a specific figure.
2. Build data collection into your processes: Having established the benchmark, ensure that you have processes in place to continue to collect the data you need to assess whether the project has delivered the expected benefits. It can be highly beneficial to automate this and employ an appropriate analytical solution.
3. Ensure you can disentangle benefits: The reality of course is that organisations are often progressing several change projects at once. If you are running 3 projects, all of which are aiming to produce a 10% increase in sales, and 12 months later you’ve seen a 15% increase in sales, how can you determine which projects have succeeded and which have failed? This is a complex area, but again, ensuring you collect the adequate data (and have the capability to ‘crunch’ the data) is important.
Whilst not an extensive list by any means, keeping these three considerations in mind from the time the project is conceived will help you to write a “benefits friendly” business case document.
I hope you have found this article useful. What are your views on business cases and benefits realisation? I’d love to hear them – please add a comment below. – Adrian.
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I’ve been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.